The Russian knockoff brands that are all too familiar

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. McDonald's, Starbucks, IKEA. Or should I say Uncle Vanya? Star, coffee and idea. After Russia's invasion of Ukraine earlier this year, many big Western brands shut their operations in Russia and left the world's 11th largest economy. But these businesses were incredibly popular with the Russian people. Many of them were potent symbols of post-Cold War Russia and had become a major part of the Russian people's lifestyle and culture. And their abrupt closures left a gaping hole. Now the void is being filled by Russian entrepreneurs. The amount of knockoff brands has shot up since the war began, and these aren't unlicensed knock offs you might see when travelling overseas. These are government sanctioned knockoffs. They're going to be big Russian businesses, copycats of their Western counterparts. It's Wednesday, the 31st of August. And today I want to know what's happening with Russian knockoffs. Are they popular and is anyone trying to stop them? To do this, I'm joined by my colleague, Darcy Cordell. Darcy, welcome to the dive. 

Darcy: [00:01:17] Thanks, Sascha. Great to be with you.

Sascha: [00:01:19] If you are going to start a rival company to any of one of your brands, which one would it be? 

Darcy: [00:01:24] The Australian Football League. 

Sascha: [00:01:26] Because I should should've seen that one coming. You're such a fan. So let's get to the topic at hand. Take me back to February 24th when Russia entered Ukraine. What was the response from governments and multinational corporations?

Audio clip: [00:01:40] Your giant Heineken is the latest major company to halt operations in Russia in response to Russia's invasion of Ukraine. [00:01:47][6.9]

Darcy: [00:01:47] McDonald's, Coca-Cola. [00:01:48][0.7]

Audio clip: [00:01:49] Starbucks suspending operations in Russia, other Western countries shuttering in Russia, right along with the golden. [00:01:53][4.8]

Darcy: [00:01:54] Arches. So these major companies have either suspended their services in Russia or moved out of the country entirely. And others, including Apple, Disney, H&M, Netflix, PlayStation, Spotify, Tik Tok and Levi's Jeans have all done the same. [00:02:08][13.8]

Sascha: [00:02:09] Many big international companies have left, but only a few have been knocked off. Three that really piqued our interest were McDonald's, Starbucks and IKEA. They all left Russia, but we're now seeing some. No, I've got to say eerily similar brands popping up. So can you tell me a bit more about these three? [00:02:28][19.7]

Audio clip: [00:02:29] McDonald's is selling its business in Russia in response to the war in Ukraine. Burger chain said it wasn't consistent with its values to continue operating there. [00:02:37][8.4]

Darcy: [00:02:37] Back in March, McDonald's closed all 846 of its Russian stores in response to the war, and it recently confirmed that move would be permanent. So leaving the country is expected to cost McDonald's about $1.2 billion. But soon after, they found a buyer in Russian businessman Alexander Duval. And he already operated 25 of McDonald's outlets in Siberia. But just days after they did shut their doors in Russia, a trademark application was filed for a brand called Uncle Vanya. So the nearly 850 Russian restaurants will operate under that Uncle Vanya name, and they'll be staffed by pretty much the same 62,000 employees. But the best part or the worst, Sascha, is the logo. It's the famous arches that rotated 90 degrees and formed into the Russian letter B, which sounds like the English way for Vanya. [00:03:29][51.7]

Sascha: [00:03:30] A cheeky re-use of the symbol that I see from what I can say. It's well worth googling. And this is especially potent because McDonald's opened its doors in Russia just after the Cold War. [00:03:41][11.9]

Darcy: [00:03:42] That's right. [00:03:42][0.3]

Audio clip: [00:03:43] Well, it's been 14 years in the making. And today, finally, McDonald's threw open the doors to its first restaurant in Moscow. And make no mistake, this was an event of major gastronomic courses. [00:03:53][10.2]

Sascha: [00:03:54] So what about Starbucks? [00:03:55][0.8]

Darcy: [00:03:56] Starbucks has been another symbol of Western influence in Russia, and they opened their first ever coffee shop in 2007 in Russia, and they expanded to 130 locations and employed about 2000 staff in Russia. But like McDonald's, Starbucks permanently shut their stores in May. But just last week, stores coffee opened Sascha and Russian rapper Tamati and restauranteur Anton PINSKY, who were the two that acquired the rights to the chain in Russia. They attended the opening of the first 130 cafes that were previously owned by Starbucks. And Russian authorities have also taken trademark applications for Starbucks, McDonald's with a K and Mac DAC. All three from the same applicant. [00:04:39][43.0]

Sascha: [00:04:40] Okay, so then we've got IKEA. What's happening to them? [00:04:44][4.1]

Darcy: [00:04:45] The world's biggest furniture brand, IKEA. They also closed their Russian stores in early March, but only a few days later, a registration of trademark for a new furniture company with that very similar logo was submitted to the Russian government for approval. This is a bit of a funny one, although I couldn't be bothered to change with one letter instead of IKEA. It's now idea. [00:05:06][21.0]

Sascha: [00:05:07] They could have used a little bit more imagination. [00:05:09][1.7]

Audio clip: [00:05:10] Russia has been decoupled from the global economy and all these goods and services that came into Russia over the past years and made Russia part of the modern world. So the ripple effects of this are going to be massive. [00:05:22][11.7]

Sascha: [00:05:22] So are there any other examples of rebranding in Russia? [00:05:26][3.3]

Darcy: [00:05:26] So Yale School of Management, they've estimated that 1000 companies have stopped operations in Russia after the onset of the war in Ukraine. So there's plenty of brands for Russian businesses to knock off. Let's play a little game here. And without looking up their packaging or logos. Sascha, I want you to guess what these new Russian brands are knockoffs of. [00:05:47][20.4]

Sascha: [00:05:47] Okay, hit me. [00:05:48][0.5]

Darcy: [00:05:48] Cold cola. [00:05:49][0.4]

Sascha: [00:05:50] That's going to be Coca Cola, right? [00:05:51][1.2]

Darcy: [00:05:51] Well, we started with an easy one, one out of one who. [00:05:53][2.3]

Audio clip: [00:05:54] Cola is on their shelves right now of this store. So we might as well give it a quick sip. Let's let's hear the fears, my. [00:06:01][7.3]

Darcy: [00:06:01] Friends, and a bit more on Coca Cola. The Russian drinks producer of Takeover said that Coca Cola has, quote, the classic flavours of your favourite soft drinks with a, quote, cult taste. Sounds a lot like, you know what? To me. [00:06:14][13.1]

Sascha: [00:06:15] It sounds like they're suddenly trying to announce that they're very similar to Coca Cola. All right, what's next? [00:06:21][6.6]

Darcy: [00:06:22] Fancy. [00:06:22][0.0]

Sascha: [00:06:24] Is that Fanta? [00:06:24][0.3]

Darcy: [00:06:25] Very good. Yeah. Yep. Fancy is Fanta. And once you look at the packaging, you will not mistake it. [00:06:30][5.3]

Sascha: [00:06:31] Okay. Have you got any others up your sleeve for me? [00:06:34][2.4]

Darcy: [00:06:34] Last one I've got for you is straight. [00:06:35][1.3]

Sascha: [00:06:37] All I can think of is sts ice cream. Is it that brand? [00:06:40][3.2]

Darcy: [00:06:41] Not quite. This is the hard one. This is Sprite. So it's lemon lime straight or Sprite. Okay. The last two might not be as obvious, but once you see a photo of the bottles, it'll be really hard not to think of the original brand. [00:06:52][11.7]

Sascha: [00:06:53] All right. It sounds like they're not too concerned about trademark or copyright issues with names that are that similar. Let's take a quick break and then I want to know if there's any consequences for these copycat brands, brazenness. [00:07:05][11.5]

Speaker 8: [00:07:09] After more than a month of fighting in Ukraine, ordinary Russians have fewer options when they go shopping. More than 600 foreign brands have announced their withdrawal from Russia, according to Yale University. Some cited concerns about the conflict and the safety of staff, while others left as the U.S. and its allies unleashed a raft of sanctions that could complicate business operations in the country. [00:07:29][19.3]

Sascha: [00:07:29] Welcome back to the Dive. We've been hearing about the, quote, new brands in Russia that are very similar to some of our old favourites. Forget McDonald's, forget Starbucks, IKEA and Coca-Cola. Russia now has Uncle Vanya as star coffee idea and cool cola. So, Darcy, I guess the question is, are there any legal implications here or copyright issues? Can these Russian businesses just carry on operating as they please? [00:07:58][28.6]

Darcy: [00:07:59] Sascha, you can pretty much do what you want in Russia now. The Russian government has indicated that it would allow individuals and businesses to use patents and trademarks, including brand names from so-called unfriendly countries without permission. So this is allowed all these brands to be knocked off, essentially without any repercussions. And for the brands that have been knocked off, McDonald's, IKEA, Starbucks. Good luck making the Russian counterparts pay. Even if you brought a case forward. [00:08:26][27.2]

Sascha: [00:08:27] Has this sort of imitation happened before then? [00:08:29][2.2]

Darcy: [00:08:29] It actually has. And not far away at all. So bootleg versions of Western brands have been operating for several years in breakaway regions of Ukraine, like Crimea, where governments sympathetic to Russia have been operating. So similar to what we've seen this year, there have been sanctions imposed on these areas for a couple of years. And imitation brands have been quick to swoop. Once the Western counterparts left, one of those brands is, quote, Don Mac, which translates to Big Mac, a chain whose yellow M shaped logo bears a very strong resemblance to McDonald's that we've got star ducks. Sascha and I serve lattes, espressos, cocoa and tea at locations in Crimea. [00:09:11][41.1]

Sascha: [00:09:11] Okay. [00:09:11][0.0]

Darcy: [00:09:12] Perhaps my favourite fried chicken fans can go to Crimea and fried chicken or KFC, which sells buckets of chicken as well as big is barbecue and chicken sandwich. Its motto is I'm good here. [00:09:24][12.1]

Sascha: [00:09:25] I know one of their slogans. Darcy was so good and finger lickin good, so obviously just gone with the good theme and come up with something. [00:09:33][8.5]

Darcy: [00:09:34] To sort this out. [00:09:34][0.6]

Sascha: [00:09:35] Yeah, short and sweet. I'm good here. So we're talking about these powerful companies McDonald's, IKEA, Starbucks, Coca-Cola, KFC. You know, all of them are multibillion dollar companies with a fair bit of heft behind them. Have they done anything or are they just powerless in this situation? [00:09:53][17.5]

Darcy: [00:09:53] Yeah, as we've kind of touched on, they're pretty powerless in Russia. They can't enforce their trademarks in Russian courts. They can't lobby Russian politicians. And they can't stop these Russian entrepreneurs from taking their stores and operating them under these knockoff brands and trademarks. [00:10:08][14.4]

Sascha: [00:10:09] So if they can't really stop them, then what happens if McDonald's, IKEA, Starbucks, any of these companies want to return to Russia in the future? Is that going to be possible? [00:10:19][10.0]

Darcy: [00:10:19] Well, relations with most countries and companies are severed at the moment, and I can't see that changing for a long time, Sascha. These businesses would probably have to reapply for trademarks if they wanted to enter Russia again. But if relations do get better and Western companies want to re-enter the country, we could see a situation where McDonald's is competing with Uncle Vanya or Starbucks competing with Star Coffee. Wow. [00:10:42][22.4]

Sascha: [00:10:42] Well, the big question and one I've avoided so far is any of them making money. How successful have these knockoff companies been. [00:10:49][7.3]

Darcy: [00:10:50] Before the onset of the war? These were some of the most successful businesses in Russia. McDonald's stores in Russia and Ukraine were generating about $310 million annually, according to Reuters. But no one expects Uncle Vanya or stars coffee to do as well as McDonald's and Starbucks. Just sourcing the same quality of ingredients and having the same level of management is going to be difficult. But still, even if they're generating a fraction of what their Western counterparts used to make, they'll still become some of Russia's biggest businesses. But we haven't got much data yet on how successful they've been or will be. [00:11:25][35.1]

Sascha: [00:11:26] Sascha, interesting. Well, the most disappointing thing for me, Darcy, is that they couldn't come up with more original names than just changing it from IKEA to idea. You'd think you'd be more imaginative if you're going to be just blindly knocking something off. 

Darcy: [00:11:41] Yeah, I think they clearly want to keep their keep their loyal customers.

Sascha: [00:11:44] Yeah, absolutely. If you enjoyed this episode, please tell a friend about it. It really is the best way for our podcast to go. And if you're listening because you've been referred, then thank you so much. We have a growing back catalogue that's well worth checking out. Our last three episodes of talked about student loan forgiveness, the business of Mr. Beast, YouTube's highest earner, and our three biggest takeaways from the reporting season. Go check. Time out. Remember, you can follow us on Instagram at the Dive Drop Business News. You can contact us by email the diver Equity Mates dot com and you can subscribe wherever you're listening right now so you never miss an episode. Darcy, thank you so much for joining me today. 

Darcy: [00:12:23] Thanks

Sascha: [00:12:24] Until next time.